Exactly my point to @pmaitra. There can be excessive Dollar since those are being used in transactions.
So long as China is an export driven economy it will need the Dollar to be high compared to the Yuan.
The Petro-Dollar is the currency that one must possess to purchase Saudi oil. Since oil is usually in high demand, especially after the Suez Canal Crisis, oil being available only for Dollars also raises the value of the Dollar. However, when the price of oil in Dollars crashes, the Dollar's value w.r.t. oil might be very high, but the value of Dollar as a means of purchasing oil becomes insignificant.
The Chinese is simply transferring the risk of US treasury Bonds to other countries' shoulders.
Wrong!
Right, so we are on the same page, regardless of how we phrase our statements.
Still the same, you need the Dollar to be higher than Yuan.
No, it doesn't matter whether dollar is higher. In the world trading system, people are only concerned of the MOVEMENT of exchange rate: for example, Europe dollar value has always bee around 1.2 US dollars for years, opposing to your theory, German is still a export driven economy. What really drives Americans mad is the moment Europe dollar starts to depreciate even though it is above US dollar.
Your arguments have been advanced for a long time; and proves that financial slavery is path to physical slavery.
So much for the peace dividend
In 1991, the Cold War between the US and the USSR ended, as, economically, the USSR had run its course.
Since that time, the US has had the ability to back off on armaments and to strengthen itself economically, to become even more powerful as the world's present empire.
But, of course, that's not what they did.
Instead, they went headlong in the direction of becoming a more highly armed, more fascist state.
Along the way, they became extremely reckless with their economy, following a Keynesian model that contributed to the greatest debt bubble the world has ever seen.
During this period, they had numerous knowledgeable advisors who recommended a Westphalian system of cooperation between nations.
But the leaders of the empire chose instead to pursue greater, more forceful dominance of the world.
Over recent decades, US leaders have become increasingly self-possessed with their assumed level of power.
So much so that, as long as they can sell the idea to the American people that the larger world is a threat to the US, they can advance as they please against other nations.
Nowhere in their thinking were they more incorrect than in their assumption that they could arrange for a takeover in Ukraine, a country long regarded as a key objective by the West in lessening Russian power.
Russian Takeover
But in the decades since 1991, Russia has rebuilt itself and has become powerful once again.
In addition, its present leader has shown himself to be able to consistently outwit US leaders. This was either not anticipated or was regarded as unimportant.
Not only have American attempts at diminishing Russian influence resulted in Russia deftly countering every US move, they have resulted in Russia's leader gaining great popular support, just as the US president loses his.
Further, it has driven the Russians toward the other BRICS, convincing them to become closer with regard to treaties, trade, and economic development.
Along the way, the less powerful countries in the world, seeing the rise of the BRICS and realising that they might need to choose between the two, are choosing the BRICS.
The Russians and Chinese have been busy in recent years, signing treaties and agreements first with Second- and Third-World countries and now with Western allies in Southeast Asia and Europe.
At this point, the US, if it had any sense at all, would back off dramatically, but this will not happen.
Even such a stalwart US advisor as Henry Kissinger recently told Germany's Der Spiegel that, regarding the handling of the Ukraine effort,
"If the West is honest with itself, it has to admit that there were mistakes on its side." He further stated,
"There clearly is this danger, and we must not ignore it."
He warned that not to do so may result in "a historic tragedy."
Coming from Mister Kissinger, these comments, as understated as they are, speak volumes as to the folly of the present US leadership.
Only a decade or two ago, the US had visions of creating a world in which it was the undisputed leader, with the other powers acting as lesser players, beholden to the US.
But, incredibly, the US has trashed its own economy, driven productivity away (via the world's highest corporate taxation), and created a level of debt that is far too large to ever repay. To add to this, they have invaded country after country.
What on Earth made them think that the BRICS would take this lying down?
Sterling BRICS
By comparison to the US, the BRICS, in recent years, have done a sterling job of becoming increasingly productive, establishing treaties and trade agreements, and working toward a common understanding that the US and the EU are a danger to them.
- China will take over as the world's most productive country.
- China Merchants Bank now issues the world's #2 credit card.
- In response to US/EU sanctions, Russia and China have recently inked the largest energy-provision agreement the world has ever seen, posing a major threat to the continued position of the petrodollar.
- By mid-2015, the Angola-Brazil fibre-optic cable will enter service, providing cheaper (by 80%) communications for the BRICS, independent of the US.
- Increasingly, the world is entering into agreements to trade in the yuan and the ruble. Some EU countries now issue bonds in yuan.
New SWIFT
In recent years, I've forecasted that an even more significant step would be taken by the BRICS—that they would create their own SWIFT system.
At first, this may have appeared unlikely, based on their continued statements that their objective was to gain a more equitable seat at the IMF table.
Additionally, many people have not felt that such a move would be all that significant, as SWIFT is little more than a means by which to transfer payments.
However, I regard the possibility of a second SWIFT system as a major, major development, as, without it, the BRICS are still tied to the US/EU banking system and must therefore accept their edicts.
My belief has been that the BRICS would wait until most of their ducks were in a row before making this announcement.
Russia has now made it. It's set to be operative within the first half of 2015.
I've often stated that, with each year, both the magnitude and the frequency of events will increase. That theory seems to be holding true.
Only a year or so ago, the question of whether the BRICS might even form their own IMF might have seemed quite fanciful. Today, we should be looking more closely at this possibility.
With this final step, the world could literally function as two separate worlds.
Communication, trade, and inter-governmental economic dealings will undoubtedly continue, but at this historic point, the BRICS will have the ability to operate entirely independently and can no longer be held to ransom through the threats of sanctions from the West.
The world is now changing rapidly, and our future plans should be based not on what exists at present, but on what is likely to exist in the future.
Editor's Note: There's little any individual can practically do to change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation. That's what International Man is all about—making the most of your personal freedom and financial opportunity around the world. The free IM Communiqué is a great place to start.
Comment that we might want to validate, debate, and ponder about:
Alastair Crooke, ex spook and diplomat
Crooke, who was in Turkey for the Ä°stanbul Forum, has answered our questions in this regard including the question as to where Turkey stands in the world.
Would you tell us about your ideas in regards to the "financialization of the global order"?
For some time, the international order was structured around the United Nations and the corpus of international law, but more and more the West has tended to bypass the UN as an institution designed to maintain the international order, and instead relies on economic sanctions to pressure some countries.
We have a dollar-based financial system, and through instrumentalizing America's position as controller of all dollar transactions, the US has been able to bypass the old tools of diplomacy and the UN -- in order to further its aims.
But increasingly, this monopoly over the reserve currency has become the unilateral tool of the United States -- displacing multilateral action at the UN.
The US claims jurisdiction over any dollar-denominated transaction that takes place anywhere in the world. And most business and trading transactions in the world are denominated in dollars.
This essentially constitutes the financialization of the global order: The International Order depends more on control by the US Treasury and Federal Reserve than on the UN as before.
When did this start?
It started principally with Iran and it has been developed subsequently. In a book, "Treasury's War," the tool of exclusion from the dollar-denominated global financial system is described as a "neutron bomb." When a country is to be isolated, a "scarlet letter" is issued by the US Treasury that asserts that such-and-such bank is somehow suspected of being linked to a terrorist movement -- or of being involved in money laundering. The author of "Treasury's War" [Juan Zarate], who was the chief architect of modern financial warfare and a former senior Treasury and White House official, says this scarlet letter constitutes a more potent bomb than any military weapon.
This system of reliance on dollar hegemony no longer requires American dependency on the UN and hands control to the US Treasury overseen by Steve Cohen -- a reflection of the fact that the military tools have become less available to the US administration, for domestic political reasons.
But with Ukraine, we have entered a new era: We have a substantial, geostrategic conflict taking place, but it's effectively a geo-financial war between the US and Russia. We have the collapse in the oil prices; we have the currency wars; we have the contrived "shorting" -- selling short -- of the ruble. We have a geo-financial war, and what we are seeing as a consequence of this geo-financial war is that first of all, it has brought about a close alliance between Russia and China.
China understands that Russia constitutes the first domino; if Russia is to fall, China will be next. These two states are together moving to create a parallel financial system, disentangled from the Western financial system. It includes replicating SWIFT [Society for Worldwide Interbank Financial Telecommunication] and creating entities such as the Asian Development Bank. One of the principal tools in the hands of Washington to control the global system was always the International Monetary Fund [IMF].
Nations have to go to the IMF to ask for financial help, when in difficulties, but recently it was China -- and not the IMF -- which bailed out Venezuela, Argentina and Russia as their currencies crashed. China became concerned when the ruble crashed on Dec. 16-17, and intervened to halt a run on the currency. The IMF and the World Bank were no longer at the center of the global financial order. They had been displaced by China.
What would you say about the prospects of success of this new order?
It is too early to say that it will be successful, but it is a very important shift that is taking place. It has already started to have an effect. Take Russia: European and American leaders thought that Russia would weaken because of sanctions and the fall of the ruble, but China intervened and stopped the collapse in the ruble. In short, China is operating as a backstop to a financial system that is in the process of shifting dramatically away from Western control. And it affects the Middle East.
Why does it affect the Middle East?
Because the consequences of these oil and currency wars are influencing other countries -- many energy producers in the Middle East and elsewhere and emerging markets have seen their currencies crash as the dollar gets stronger. There is a huge move of capital out of emerging markets and out of Middle Eastern states whose currencies consequently have been adversely affected. For the first time, too, we see the end of the petro-dollar as a system for recirculating oil revenues to Wall Street.
For the first time, it has turned negative: It is sucking liquidity out from Wall Street, not putting it in. The fall in the price of oil has suddenly created huge financial turbulence, which is endangering the global financial system.
Why has the oil price dropped?
There was a decision by Saudi Arabia to reduce the price of oil for two reasons: to hurt Iran and to put pressure on Russia to change its stance and drop its support for President [Bashar al-]Assad. The Saudi determination to get rid of Assad remains extremely strong in Riyadh. They only reduced output by 100,000 barrels a day in the first month, and then it started an avalanche: The market had been artificially inflated by the oil companies lending crude oil to financial investors who want a hedge against inflation and currency fluctuations.
Investors were borrowing physical oil, which made them feel safe, and knew that the oil companies would eventually repurchase the physical oil from them in due time. With the fall of the price of oil, all of this purely investment demand vanished, and the price dropped further. One sees something similar in the gold market, where only 10 percent of gold transactions involve the transfer of ownership of actual gold. The other 90 percent are simply paper bets on the price of gold, but which never result in the purchase or sale of actual gold.
There are two aspects to it
I would say that we have gone into low key mode with Russia rather than the stealth mode. Get on with the business minus the usual shenanigans that accompanied the Indo-US detente.
India has firmly signalled it's intent to support Russian position on Crimea and flashed two-fingers to EU and US.
First of all, good to see you back after a while, buddy. Hope all is well.
Some of your concerns might be addressed in this article by Saurav Jha entitled "In India Putin Got All the Political Assurances He Came For." On top of that, I concur with this post by @mayfair.
